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Returns to investors in stocks in new industries

  • Gerald P. Dwyer, Jr.
  • Cora Barnhart

We examine the returns to investors in publicly traded stock in new industries. We examine data from the United States on sellers of own-brand personal computers, airlines and airplane manufacturers, automobile manufacturers, railroads, and telegraphs. We find that a relatively small number of companies generate outstanding returns and many firms fail. Firms in new industries typically have high volatility of individual stocks' returns. Compared with indexes for the same period, expected returns of firms are higher for two industries, lower for one industry and roughly the same for two industries. Portfolios of firms in new industries generally have lower Sharpe ratios than the overall market.

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Paper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2008-21.

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Date of creation: 2008
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Handle: RePEc:fip:fedawp:2008-21
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  1. Paul A. Gompers & Josh Lerner, 2001. "The Really Long-Run Performance of Initial Public Offerings: The Pre-NASDAQ Evidence," NBER Working Papers 8505, National Bureau of Economic Research, Inc.
  2. Cochrane, John, 2000. "The Risk and Return of Venture Capital," University of California at Los Angeles, Anderson Graduate School of Management qt7qm9h594, Anderson Graduate School of Management, UCLA.
  3. William N. Goetzmann & ROGER G. IBBOTSON & LIANG PENG, 2004. "A New Historical Database For The NYSE 1815 To 1925: Performance And Predictability," Yale School of Management Working Papers ysm5, Yale School of Management.
  4. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58.
  5. anonymous, 1978. "Communication," Management Science, INFORMS, vol. 24(9), pages 919-919, May.
  6. Garbade, Kenneth D & Silber, William L, 1978. "Technology, Communication and the Performance of Financial Markets: 1840-1975," Journal of Finance, American Finance Association, vol. 33(3), pages 819-32, June.
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